Presentation on theme: "Managing with Measures for Performance Improvement"— Presentation transcript:
1 Managing with Measures for Performance Improvement Office of Quality ManagementOffice of Research ServicesNational Institutes of HealthOctober 2005
2 Session Outline Background Overview Developing Measures Effectively Managing With MeasuresService Group ExamplesQuestionsSession Evaluation
3 BackgroundThe President's Management Agenda, announced in the summer of 2001, is an aggressive strategy for improving the management of the Federal government. It focuses on five areas of management weakness across the government where improvements and the most progress can be made.Factual Example -The Federal government spends over $25 billion annually on IT systems and services. Do these services improve efficiency or reduce costs? It is likely they do, but without measuring and communicating the results, how will anyone know?More information at
5 Summary OverviewOrganizations succeed when resources within a service group work together to achieve a common goal.This is also true for performance measurement which includes establishing operating strategies, defining processes that contribute to the strategies, and evaluating, using and communicating the results to improve performance.
6 Overview (Performance Measurement) Iterations of Performance MeasurementOrganization value proposition &objectivesDetermineNew objective addedCustomer needs& requirementsMeasured resultsRefine asneededResults not usedNew mandated requirementCollect &evaluateTarget met- newstretch target setRequirement successfully met-shift focusSelectPrioritizedrequirementsPerformancemeasuresDevelop/refine
7 Overview (continued) Some of the leading methods that are helpful in implementing and managing for performanceimprovement include:The Balanced Scorecard (Performance Management Plan)ProductivityContinuous ImprovementProcess ImprovementThese methods compliment each other and should beincorporated for performance improvement.
8 Overview (Balanced Scorecard) Balanced Scorecard (Performance Management Plan):A new management concept (1992) helps managers atall levels monitor results in their key areas:financial performance,customer knowledge,internal business processes,learning and growth.This allows the monitoring of present performance, butalso tries to capture information about how well theorganization is positioned to perform well in the future.
9 Overview (Productivity) Productive business tend to succeed over lessproductive competitors because their costs are lower forthe same level of output. How can managementact to increase productivity?Ensure that the overall direction of the organization is correct and clear. Ensure that communication is clear, thorough and open. If everyone is aligned, less time and energy is wasted.Detect problems early, and nip them in the bud.Ensure the group is not reacting to imaginary problems. Use process behavior charts to track key processes, to be able tell the difference between real changes in your environment and processes, and normal variation.
10 Overview (Productivity continued) Ensure the group is not reacting to imaginary problems. Use process behavior charts to track key processes, to be able tell the difference between real changes in your environment and processes, and normal variation.Talk with staff for input. They usually know what is constraining them from doing better work. Ask them, listen, and involve them in the solution.Systematically remove barriers to progress. Get rid of scrap. Get rid of rework. Reduce inspection as much as possible.Understand your real costs. What does a machine really cost? Can a process be done better inside the organization?
11 Overview (Continuous Improvement) Continuous Improvement (Kaizen):In contrast to the usual emphasis on revolutionary,innovative change on an occasional basis, continuousimprovement looks for uninterrupted, ongoingincremental change. In other words, there is alwaysroom for improvement and continuously trying tobecome better.The principles of implementation are:human resources are the most important organizational assetsprocesses should evolve by gradual improvement rather than radical changes,improvement should be based on statistical/quantitativeevaluation of process performance.
12 Activities Output Input Overview (Process) Every activity, or work done, in an organization is part of a process; many processes make up discrete services.InputIncludes resources such as staff, equipment, information, forms, moneyActivitiesIncludes all steps taken to get a specific outputOutputFinal goods or services from the process, for example assessment of policies, spot inspections, software training
13 Overview (Process example) Example: Order ProcessEntersalesorderStartApprovedfor credit?NoRejectorderYesInventoryavailable?NoBack-orderYesFill orderStop
14 Overview (Process continued) Processes should add value, i.e. accomplish something.Focusing and measuring areas within processes results in more rapid, substantial improvements.
15 Overview (Process issues) Many processes are not optimal – there is generally some wasted effort, lost time, scrap, miscommunication, or re-work.These problems all have costs - some small, and some great.Good News - Management practitioners have, over the years, developed tools which can be used to measure and systematically improve processes and overall operations.
16 Classic ToolsThe best tools stand the test of time and give a lot of leverage over common problems.The most widely used management methods and toolsinclude:Quality Control ChartsPie chartsBar chartsRun ChartsRadar ChartsScatter PlotsHistogramsPareto ChartsNormal Test PlotsProcess Capability CalculationsControl Charts (Process Behavior)Other Quality Management ToolsRelations DiagramAffinity DiagramsBrainstormsBuilding ConsensusCause and Effect DiagramsFlowchartsForce Field DiagramsTree Diagrams
23 Measures Overview What is a Measure? A measure is a means of assessing performance in a particular area.Why Measure?Measures are at the heart of a good, customer-focused process management system, and any activity directed at continuous improvement.
24 Measures Measures help drive performance improvement. Measures help provide a basis for assessing efficiency and effectiveness of services.
25 Measures (Performance Management Plan) The Performance Management Plan (PMP) has been,and is a useful tool to plan and take the pulse of anorganization.The PMP assists organizations with:Effective organizational performance measurementImplementation of strategy
26 Measures (Value Proposition) The PMP focuses on documenting a group’s valueproposition, main operating strategy, and objectives infour perspectives:Value PropositionCustomerWho do we define as our customer? How do we create value for our customer?Internal ProcessTo satisfy customers while meeting budgetary constraints, at what business processes must we excel?How do we enable ourselves to grow and change, meeting ongoing customer needsEmployee Learning and GrowthStrategyFinancialHow do we add value for customers while controlling costs?
28 Steps to Develop and Manage with Measures Link Processes to ObjectivesUsing the PMP framework, establish a clear understanding of your service group’s purpose, or value, and your objectives. Update as necessary.Identify linkages between your processes (work that is done) and defined objectives to increase the likelihood that improved process results will contribute to total service group accomplishments.
29 Steps to Develop and Manage with Measures (Identify) Identify and Select Performance MeasuresWithin the objectives, identify what process is being measured, where applicable, and the goals of each process being measured.Decide how requirements will be met.Know the purpose of the results.Understand why the results matter.Measure that which is most important.NOTE:Effective performance measures reflect a strong customer focus.
30 Steps to Develop and Manage with Measures (Baseline) Establish Baseline to Compare Future PerformanceBaselines are an essential element of performance measurement.If no baselines exist, select measures that will establish the basis for comparing future performance, collect data about current processes, work output, and service group outcomes.
31 Steps to Develop and Manage with Measures (Select Processes) Select Processes with the Greatest ImpactSelect those processes, tied to the objectives, within each PMP perspective with the greatest operational impact.Remember to highlight areas that will allow measurement of key elements of your primary strategy.
32 Steps to Develop and Manage with Measures (Collect data) Address data collection during development of measures.Decide the “what, when, where, how and by whom” of collecting the data and document it.Validate data.Review performance measures to verify they represent what they intend to gauge – Are we measuring the right thing?
33 Steps to Develop and Manage with Measures (Validate data) Validate Data (example)Internal Business ProcessRealize efficiencies in key areas
34 Steps to Develop and Manage with Measures (Collect data cont’d.) Collect Data (continued)Document measures using any one of the suggested forms on the next three slides:
35 Measure Type (input, output, efficiency, quality or outcome): Simple Measurement Plan (simple tracking for each measure can be done in MS Word or Excel)Process:Measure Type (input, output, efficiency, quality or outcome):Description: What is the measure capturingThe measure is: List the actual measure, e.g., number of, percentage of, etc.The target is: May be baseline, or projections computed against baselineData Source: Where to get the dataResponsiblePerson/Component: Who, or which group will collect the dataFrequency: How often will the data be collected, and reported onDate Developed:
36 Data Collection Plan Template NOTE: actual template is blank; the content in each column describes what should be filled in.Available at
37 Measure Roadmap Template NOTE: actual template is blank; the content in each box describes what should be filled in.Available at
38 Steps to Develop and Manage with Measures (Analysis) Analyze Documented ResultsExamine results in context of the objectives, environment, and external factors.After analyzing the performance data and information, interpret the information in order to ascertain whether the objectives have been met, and if not, why not.In cases where the objectives are not being met, develop an action plan to correct this.E.g., If feedback indicates that fewer customers are utilizing a new service provided by your service group, note this and make the necessary modifications to improve or tailor the service.
39 Steps to Develop and Manage with Measures (Communication) Communicate ResultsGraphically display data, using process behavior, pie, and bar charts, or other form to summarize performance rather than narrative alone.Develop brief updates to share monthly among staff showing monthly progress.Customer fiscal serviceObjective:Shows cost per customer
40 Steps to Develop and Manage with Measures (Communication Ex.) Communicate Results (continued) : second exampleMonthly error rate for sorting incoming mail, October 2003 to May 2005Shows process is predictable where the expectation is between 0% and .36% error ratefor any month (between 0 and 36 errors per 10,000 pieces of incoming mail).Note: Data gathered by random sampling.
41 Steps to Develop and Manage with Measures (Communication example) Communicate Results (continued) : third exampleObjective:
42 Building X Cafeteria: Daily gross sales from 4/2/2004 to 7/1/2004 Average Gross sales:$1170.The lower limit: $857The upper limit: $1484.7/1/2004The process during this period was predictable and the group can expect theamount of sales to vary from between $857 to $1484, given no substantial changes,for example sudden menu change or sudden population increase or decrease.
43 Steps to Develop and Manage with Measures (continued) Integrate Measurement with Management ProcessesThe benefit of performance measurement comes from using data to take the appropriate actions to improve performance.To remaining viable, demonstrate service group value through results.Integrate results (input, activity, output) into planning, budgeting, and operating processes in the business.
44 Summary of Steps to Develop and Manage with Measures: Link Processes to ObjectivesIdentify and Select Performance MeasuresEstablish Baseline to Compare Future PerformanceSelect Processes with the Greatest Operational ImpactCollect DataAnalyze ResultsCommunicate ResultsIntegrate Measurement with Management Processes
47 Objective and Measures Service Group: Procure and Deliver Animal Product C1: Increaseresponsiveness toneedscustomers' varyingMeasureC1b: Percentage ofprocurement ordersprocessed within 24 hoursC1d: Number of complaintsrelated to responsiveness ofprocurement servicesC1f: ORS CustomerScorecard rating for animalprocurement responsivenessC1b and C1d: These measures are used to drive performance towards reaching an objective. By focusing on each of these measures, the workforce will be taking actions that will satisfy their customers and raise the customer satisfaction scores.
48 Automatically Calculated Data SheetAutomatically Calculated
49 Output Measure: % of Procurements Processed within 24 hours (C1b)
50 Run Chart – (line graph) displays process performance over time Percentage of procurement orders processed within 24 hours (C1b)WHAT DOES THIS SHOW?After a drop in February, there was a steady increase in the % of orders processed in 24 hours. Investigating this phenomenon could unearth an improvement or process change that was instituted. Also, the average line added clarifies movement of the data away from the average.88Average = 77.27Range 88 – 68 = 2068For more robust monitoring of the process, and better information about whenthe process is showing variation beyond what is expected, try using a processbehavior chart.
51 % of orders processed within 24 hours Process Behavior Chart –displays process performance over time and makes it easy see both special and common cause variation in a process% of orders processed within 24 hoursAVE=77.3%LCL=65.7%UCL= 88.9%WHAT DOES THIS SHOW?Look at variation over time and show whether an immediate remedy is needed to modify the process or if the entire process should be redesigned.The process is in control, or predictable, but steps can be taken to improve the process, so that even common cause variation is reduced – for example, explore ways to increase order process efficiency.
52 AnalysisThe Process Behavior Chart (PBC) indicates the average percentage of procurement orders processed within 24 hours is 77.3%.The PBC indicates that you can expect between65.7 % and 88.9% of orders will be processed within 24 hours each month unless there is a change to the process.Is our performance good enough? Are we meeting customer expectations? Refer to baselines and calculated targets, as well as customer agreements and satisfaction ratings.
58 Employee/Staff Survey Results Pie Chart – used to show classes or groups of data in proportion to the whole data set.Employee/Staff Survey ResultsManagement Questions:87% of DEMS staff understand how their job contributes to the mission, vision and values of DEMSCustomer Orientation Questions:90% of DEMS staff say DEMS’ services goals are aimed at meeting customer expectationsTeamwork and Innovation Questions:93% of DEMS staff feel they can serve customers in a timely fashion
59 Analysis MethodologyA high percentage of staff feel they understand the organization’s mission, the goals match customer expectations, and they can serve customers in a timely manner.Lower percentages on the charts should be addressed.Practical corrective actions should be employed to maintain and/or improve performance.The information serves as input to the overall service and processes provided by the group; improvement in learning and growth areas drives behavior to achieve objectives.
61 Financial Objective and Measures Service Group: Provide Transportation and Parking Services
62 Measuring Input Input Measure: Minimize the unit cost for providing shuttle services (F3)
63 Calculation Example Minimize the unit cost for providing shuttle services (F3) Note: Estimate that budget for patient shuttle is 30% of total budget for the discrete service; budget to employee shuttles is 70% of budget for the discrete service.
64 Analysis ExampleDetermined the basic unit of service delivery – number of ridersCounted the number of riders on shuttle – this becomes the denominator for the unit cost formulaDetermined the dollar resources expended in providing shuttle service – this becomes the numerator of the unit cost formulaThe ratio of numerator ($) divided by denominator (riders) yields cost per rider on the shuttlesUse this and other data to reveal methods to maintain (or if possible lower) the “unit cost” – example is to encourage more riders - lowers unit cost ( reason: more riders for same resources)
66 Questions to integrate performance data into Business Management: How can the performance data be used to improve business decisions?Examine data for trends over time and across functions. What do the results mean? Do the results contribute to goals and objectives?Have the right measures been included in the PMP? Does the PMP reflect our priorities?Are the performance results helping the manager make better decisions? If not, notify the team or individuals that are responsible about the data that is needed.If the performance results exceed the targets, how can the service group take advantage of additional benefits to improve service and reduce operating costs? What opportunities do the additional benefits make possible?
67 Source: Performance Based Management, P. Plunkett Questions to integrate performance data into Business Management (continued):What is the level of customer satisfaction?If the results fall short of the targets, what inhibited performance? Were the inhibitors technical or organizational in nature?Source: Performance Based Management, P. Plunkett
68 SummaryMake sure your objectives reflect your value proposition and strategy.Link measures to objectives.Tools such as the data collection plan and measure roadmap help in being systematic in data collection.Additional help on analysis of data, charts, and graphs can be provided by OQM (e.g., Process Behavior Chart training, FY02 Data Analysis Training).
69 Thank YouThank You.For more information on Performance Management in the Office of Research services:AcknowledgmentsThis training was developed by the Office of Quality Management.